Question

2 EC parti Excel guidelines students (2) Compatibility Mode) Review View ences Mailings ACC 250 Extra Credit partt Excel chart and recommendation to management This extra credit worth 2 points. You are the Chief Accountant at a company and the CEO has asked you to explain why net income is decreasing despite sales increasing. You should prepare a chart from the information provided and write a short memo five sentences explaining what your chart shows how it could be a possible explanation, and what further analysis you would recommend. Note this is not necessarily fraud related) Create a new worksheet • Open up Excel and create a blank workbook and save it • From blackboard (Extra credit) open the part il spreadsheet • Copy and paste the data into the new spreadsheet that you have just created. Remember to put your name on the spreadsheet Create a chart Create a chart that compares the net income, wages and overtime from 2005 to 2016. Ensure that the chart has a title, axis labels, and a legend showing the series labels for net income, and wages and overtime. They als should be labeled USD, the axis year. Create a word document Create a memo in the following format MEMORANDUM From: Date: Subject: Sales increases and Net Income decreases In response to your request for an explanation for the decrease in net income when overall sales are increasing, please find below chart showing trends in net income, wages and overtime. (use this sentence) (insert your chart by copying and pasting your chart from excel. Note that there are several paste options that will make your chart behave in different ways) (After the chart, write a further 5 sentences providing your explanation of possible causes, further analysis required and recommended actions) Submit your work Upload your documents onto blackboard Use the upload EC Parti Excel spreadsheet, and the upload EC part I word document under Extra Credit on Blackboard. Foc

explain why net inckme is decreasing despite sales growth

Answer 1

Net income means its the difference between total Revenue and Total Expenses

ie, Net Income = Total Revenue - Total Expenses

> Increase in the Sales won't help to increase Net income. If the sales of a firm increases it will definitely have other expenses which relate to sale such as freight paid, Discount allowed etc..

> In this case we can see that a new head overtime have been included. Through this its understood that sales increases because the workers work more to complete the product.

> the other factor is depreciation of asset such as Plant and machinery .A new addition of fixed asset to increase sales will also increase depreciation and thus net income will get reduced

А 1 Other expenses other than wages and Wages Overtime overtime Year ending 2 Net Income Sales Net Income Total Revenue - Total Income 2005 50000 2006 60000 2007 70000 2008 80000 2009 90000 2010 100000 2011 100000 2012 98000 2013 95000 2014 92000 2015 89000 2016 85000 60000 65000 70000 75000 80000 85000 85000 85000 85000 85000 85000 85000 Total Expense=sales - wages -overtime 940000 985000 0 1030000 0 1075000 0 1120000 0 1165000 5000 1210000 10000 1255000 15000 1300000 20000 1345000 25000 1390000 30000 1435000 1000000 1050000 1100000 1150000 1200000 1250000 1300000 1350000 1400000 1450000 1500000 1550000

This table is an analysis, in this the other expenses are increasing yearly.

so Increase in sales may not help in increasing revenue